Customer acquisition is all about getting as many high-value, in-market consumers in the door as possible and is arguably one of the most important initiatives for any business. It allows brands to build a client base, enable customer loyalty programs and minimize costs to increase return on investment (ROI). It can also be one of the most difficult initiatives. In order to succeed, brands need to devote resources towards understanding the prospect and providing a personalized and relevant experience.
What is customer acquisition?
Customer acquisition is the process of gaining new customers. It sounds simple enough, right? However, it requires a lot of know-how and a team of experts to optimize the process.
Customer acquisition, or client acquisition, is a crucial initiative because, let’s face it, without new customers there is no business! Brands use customer acquisition to understand the value of each paying customer by measuring the money a company spends to bring in a new client. The lower the marketing spend needed to acquire a new customer, the higher the profit. Companies look at this metric to inform their marketing strategies and improve margins.
Brands ultimately implement customer acquisition marketing to gain new customers, which can include crafting strategies and monitoring outcomes to increase their client base while reducing costs.
Although each company can design its own customer acquisition strategy, the best way to start is to consider the three phases of the customer journey where customer acquisition happens:
Discovery: When customers are looking to address a need, they evaluate different options to satisfy said need. This may be the first few visits to your website, often with the goal of consuming content and learning more about your product or services.
Consideration: Actions taken by a customer indicates interest, such as research, browsing, or signing up for alerts and promotions. They are evaluating whether or not your product or service can meet their needs in comparison to other brands.
Conversion: The experience of making a purchase and therefore becoming a customer.
This three-stage process is also known as a sales funnel or sales acquisition process. It’s important to understand how your customers move through this funnel, and tailor your customer acquisition strategy to complement each stage. Keep this in mind as we continue.
What is the customer acquisition process?
The customer acquisition process is just that—the act of acquiring new customers. Your brand should pre-define and design each step of the process. By doing so, you can create a road map to streamline the process. At any given point, a company can monitor certain parts of the road map, identify weak points and optimize for better results.
Step 1: Identify the audience
First, you need to identify your target audience. If you’re targeting multiple audiences, it might be best to design a different sales acquisition strategy for each group.
Moreover, the most successful customer acquisition campaigns have personalized elements catered to the individuals interest, needs or behavior. To identify and understand your audience, your brand can employ various methods including:
- Creating a target prospect profile, otherwise known as the customer persona
- Conducting market research through online platforms and focus groups
- Analyzing new customer profiles
- Leveraging third-party data from competitors
- Understanding social and search trends for understanding needs of customers using digital conversations
Step 2: Define your strategy & design a plan
Once you identify and understand your targeted audience, you need to leverage data findings and industry best practices to develop program launch and communication plan. Also, don’t forget to consider which stage of the customer journey your audience may find themselves in. How you message people in the discovery stage should be different than the consideration stage.
To optimize new customer acquisition, your plan should include:
- A cross-channel activation strategy with connected communications across email, display, search, social, mobile and direct mail
- A messaging matrix that considers digital voice and addresses your prospects needs and attitudes
- A testing and measurement plan that defines KPIs such as: impressions, click through rate, new customer acquisition, cost per acquisition (CPA), return on investment (ROI) and return on ad spend (ROAS)
Step 3: Launch
Once the audience has been identified, the channels have been chosen, and the KPIs are all set, it is time to launch your campaigns. During this part of the process, your company needs to monitor all pre-set KPIs and begin collecting data.
Step 4: Measurement & optimization
The entire reason to have KPIs in place is to have a clear picture of what is working and what’s not. Optimization should be an ongoing process. The end goal is to eliminate campaigns that do not bring in the best results, boost those campaigns that work well, and eliminate any issues identified through the monitoring process.
For example, if a you find website traffic is high but conversion is low, focus on the landing page and experiment with the content or CTAs.
Customer acquisition strategies
New customer acquisition campaigns can run both wide and deep with lots to research and test in order to find the best methods for a brand’s target audience. Before getting to this point, brands have to complete a series of self-assessments. This includes identifying their particular acquisition challenges, ideal customers and which channels will work best for both brand and consumer alike.
Once this self-assessment is complete, there are various evergreen acquisition strategies that companies can implement to increase their customer acquisition:
- Using video content to increase engagement.
- Do giveaways to increase organic awareness.
- Leverage content marketing to improve SEO and keep prospects engaged.
- Use consistent branding and clear communication to increase trust and authority.
- Run referral programs.
- Implement a reward program to increase client retention.
- Create an affiliate program.
- Build partnerships and utilize their leads to promote your product/service.
- Use landing pages when launching new products to highlight them and help customers focus on the new solutions the company is bringing to the market.
- Implement newsletters to collect leads and subscribers to minimize marketing costs.
- Publish content on external websites.
- Leverage influencers that reach your target audience and align to your brand voice.
- Ensure paid search campaigns are optimized based on product, audience and geographic location
It’s important not rush into any one acquisition tactic. Rather, take a step back and do the research, build out your acquisition channel matrix and growth model, and then put into play some minimum viable experiments to see what starts to gain traction.
Customer acquisition cost
The cost of customer acquisition, also known as CAC, is calculated by taking the amount spent on acquiring customers and dividing it by the number of clients earned. For example, if a social media campaign has a budget of $1,000, and it resulted in 100 conversions, then the CAC is measured at $10 per conversion.
There is no set CAC that is considered ideal across all industries. However, a good baseline can be measured by calculating the CAC compared to the customer lifetime value (LTV). The general idea is that LTV to CAC ratio at 3:1. For example, if the lifetime value of a customer is $30, then a good CAC is $10. The lower the CAC, the higher the profit margins.
Benefits of customer acquisition
Customer acquisition is the backbone of all companies. Besides supporting a healthy pipeline of new customers to balance out natural attrition, one of the most beneficial pieces of new customer acquisition is the fact that customers are highly engaged when they are new to a brand (something we see trail off over time, depending on the business).
Understanding the customer acquisition process can help companies build healthy financial projections and prepare accordingly for market needs. For example, when a company understands the CAC, it can project that if $100,000 is injected into their advertising costs, an X amount of new clients will be acquired. This helps secure funding, allot inventory, and run healthy operations with minimal waste.
Case study: A restaurant brand prioritizes acquisition
We recently helped a restaurant company quantify their acquisition strategy with transaction data. Their family of brands had a general understanding of how important email marketing was for driving in-restaurant traffic, and knew acquisition should be a major focus for the program. However, they were unsure about how to prioritize acquisition efforts based on existing resources and budget.
To help them we:
- Analyzed subscriber revenue and developed life time value (LTV) model to help quantify impact of acquisition efforts and justify cost per acquisition
- Completed a web and in-restaurant assessment and identified and prioritized areas of opportunity
- Established acquisition roadmap that included prioritized acquisition efforts across email, web, social, display, partnership, mobile, in-restaurant and search
- Launched a newly designed web interface for subscriber acquisition including cross-brand integration
The result was double-digit growth in existing channels for most brands. New channels explored drove promising impact to overall program. Further, our cross-brand acquisition efforts drove almost 2x the program growth in less than a year with minimal impact to unsubscribe rates and positive revenue impact.
Epsilon can help with your customer acquisition needs
A strong customer acquisition strategy does not consist of magic and guesswork. Rather, it is a calculated approach, saving a company money and time. At Epsilon, we focus on evolving and embracing the new ways customers interact and engage with brands. As a digital marketing agency, our experts can provide strategic consulting services, data for activation plans and digital media personalization.
Contact us for more information.